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eBay revs car insurance program

The auction site is helping its car customers avoid lemons by introducing a new warranty and insurance program that protects against fraud and vehicle breakdowns.

eBay is helping its car customers avoid lemons by introducing a new warranty and insurance program that protects against fraud, misrepresentation and vehicle breakdowns.

"The new eBay Assurance Program for Vehicles offers a set of services that builds protection into every step of the vehicle buying or selling process," the company said in a note to members. But the company warned that "the eBay Assurance Program doesn't replace common sense. The program is your safety net if something goes wrong despite buyer and seller's best efforts."

The new services are a response to customer feedback, said eBay spokesman Kevin Pursglove. eBay also introduced new vehicle inspection and escrow services.

"Even though eBay Motors is a very good product, we're always looking for ways to improve the program," Pursglove said.

Although it struggled initially, eBay Motors has taken off in recent months, helping drive up the value of goods sold on eBay. Based on the amount of vehicles and car parts sold through the site in the fourth quarter, San Jose, Calif.-based eBay estimates that customers are selling about $2 billion through the site on an annual basis, making it one of the largest categories of items on the site.

As part of the new warranty protection, eBay will protect buyers against any major failure in a car's power train for one month or 1,000 miles after they buy a car. eBay, which teamed with to provide the warranty, is offering it for free and without an inspection. However, the warranty only covers cars with less than 125,000 miles and excludes makes such as Ferrari and Aston Martin and models such as the Acura NSX, the Dodge Viper and Honda's Insight.

Likewise, eBay is offering its new purchase insurance program for free, with limits. The insurance protects buyers who never receive a vehicle they pay for or who receive one that is substantially different from what was advertised. The coverage protects purchasers up to $20,000 with a $500 deductible.

The insurance is a step up from the coverage eBay offers to other shoppers. On its main site, eBay only protects buyers up to $200, with a $25 deductible.

In addition to the warranty and insurance programs, eBay also introduced a new vehicle inspection service. The service allows buyers or sellers to schedule an inspection of a vehicle offered on eBay Motors. The inspection costs $99.95 and is offered by Inspection Solution, which promises to perform the inspection within two days and offers to do the inspection at a seller's home or office.

In a research note, Safa Rashtchy, an analyst with U.S. Bancorp Piper Jaffray, praised the new warranty and insurance programs, saying they will help spur growth in eBay Motors.

"The initiatives represent the type of incremental value-add that eBay will use to drive a higher sell-through and take-rate on the platform," he said in his note.